Think of Britain and Europe and the long civil war in the Conservative party springs to mind. Ever since Margaret Thatcher was felled by the pro-Europeans, the subject of Britain’s relationship with its own continent has induced in many Tories a permanent nervous breakdown.

David Cameron once promised to banish the demons. A modern Tory party committed to saving the Arctic huskies and hugging rather than flogging angry young men in hoodies would have neither time nor inclination to waste time, in the prime minister’s phrase, “banging on about Europe”. That was then. With the anti-EU UK Independence party promising to overtake them in the coming European elections, the Tories often now seem to be doing little else.

Cameron thought he could cauterise the wounds by promising to renegotiate the terms of EU membership and put the new bargain to a referendum. It was a tactical swerve that, predictably enough, led him into a strategic cul-de-sac. His party’s europhobes have grabbed the initiative. They want Britain out of the EU rather than a new deal. Should Cameron win the 2015 election, the promised plebiscite is certain to fracture his party.

Roger Liddle’s excellent account of Britain’s long wrestling match with Brussels, however, is a powerful reminder that Europe does not divide only the Conservatives. As he writes in The Europe Dilemma, the story has often resembled one of turn and turnabout: when the Tories warm to Brussels, Labour cools, and vice versa.

Thus Labour’s Hugh Gaitskell warned in 1962 that any decision to join what was then the Common Market would erase 1,000 years of history: “If we go into this we are no more than a state (as it were) in the United States of Europe, such as Texas and California.” Harold Wilson’s 1975 referendum was supposed to put an end to Labour infighting but by 1983 the party was campaigning for withdrawal.

Liddle has a grasp of these issues rare in British politics, having served as Tony Blair’s European foreign policy adviser and then as a counsellor to Peter Mandelson and José Manuel Barroso at the European Commission. Now the chair of the centre-left think-tank Policy Network and a member of the House of Lords, his book is required reading for anyone who wants to look beyond the sloganising in which the debate is most often framed.

The absence of a pro-European consensus among the two main parties is one of several reasons why Britain has never really settled in the EU. Alongside it are Britain’s supposedly unique global role reinforced, as Liddle puts it, by “the power of historic myths that have held public and political imagination in their grip”, and by the mismatch between Westminster’s adversarial style of politics and the continental inclination towards consensus building.

At the heart of the book is a candid account of Blair’s dismal failure to change the argument among British voters. Blair’s rhetoric was never knowingly understated. Receiving the Charlemagne Prize early in his premiership, he declared the bold aim, “that over the next few years Britain resolves once and for all its ambivalence towards Europe . . . I want to end the uncertainty, the lack of confidence, the Europhobia.”

By the end of his 10 years in office, however, nothing much had changed. When Blair came to write his memoir, Europe would merit only 12 of 700 pages – proof enough, as Liddle observes caustically, that “he does not think much of his European legacy”.

Blair’s enthusiasm to join the euro was lost to his long-running power struggle with Gordon Brown at the Treasury. During the first term this represented a failure of nerve. By the second, Europe was being eclipsed by Blair’s enthusiasm for the Iraq war. Without direction from Downing Street, ministers reverted to the default option of treating dealings with Brussels as a zero-sum game. As foreign secretary, the long-time sceptic Jack Straw pushed Blair into promising a referendum on the ill-fated European constitution.

Liddle’s retelling of these sorry events is not that of some dreamy federalist who thinks all is well in the eurocracy. He makes the pragmatic case, grounded in the realisation that Britain’s capacity to promote its interests in a world that no longer belongs to the west depends on a capacity to shape decisions on its own continent.

As a moderate Labourite he also sees an opportunity for the British left to reinvent itself as a party of European social democracy. The book ends with an ambitious agenda for the next Labour government. Doubtless he will be cheered by the recent decision of Labour leader Ed Miliband not to match Cameron’s referendum pledge.

Standing outside the EU’s most important economic project, however, Britain is in danger of sliding to the margins. The big lesson of Liddle’s story is that what’s needed, above all, is the clear-sighted political leadership that at once spells out the limitations on British power and the opportunities offered by the EU to leverage that power. Blair talked the talk; Miliband seems reluctant even to do that.